CLB restrains Birla Corp from passing special resolution

The Company Law Board (CLB) has restrained Birla Corporation from proceeding with a special resolution seeking amendment to the Memorandum of Association (MoA) of the company through postal ballot for foray into the new business of money market operations. Minority shareholders of Birla Corporation led by Birla Education Trust had moved the CLB against the postal ballot special resolution. The CLB chairman had said last Friday in the order "the company had issued a postal ballot notice with the object of amending the MoA with the intention of commencing certain new business in May 2011 to carry out money market operations including dealing in securities and other instruments." The chairman Vimla Yadav observed that if the company entered this kind of business, then the present management and its staff and employees did not have the experience required. "The company will be left to the venture in markets that are notorious, volatile and speculative," the chairman observed.

The board had also appointed Ernst & Young as an investigative auditor to probe the accounts of the company during 2008-09, 2009-10 and 2010-11. The chairman added, "there is no justification from diversion from a set of profitable business." Birla Corporation is primarily engaged in manufacturing cement, jute and power. The CLB chairman said, "It is a listed company. The interest of the company as well as the shareholders will be gravely prejudiced if this special resolution is carried through, in which in all likelihood will be carried through with 62.9 per cent votes in the respondents control and command."

The CLB restrained from further proceeding with the voting rights through postal ballot and also directed the respondents and applicants from exercising voting rights to carry through the special resolution. Ernst and Young has been asked to submit its report within three months. Reacting to the development, a Birla Corporation spokesman said, "the company is advised that the order is contrary to a large number of judgements of the High Court and the CLB in this matter delivered earlier.

" It is accordingly advised that the company will file an appeal in the Calcutta High Court challenging the order." The AGM of Birla Corporation for 2011 is slated for June 27.